Corporate Social Responsibility and Oil in the Niger Delta: Solution or Part of the Problem?

23 Jul 2014

WINNING ENTRY IN THE YOUNG SCHOLARS THINK PIECE SERIES, FIRST EDITION: EXTRACTIVE INDUSTRIES

This contribution is published as part of the Young Scholars Think Piece Series which aims to provide promising young researchers with an opportunity to present their research on social development and contribute to the diversity of ideas within the development community. The winning pieces have been selected for their alternative perspectives and the way they highlight marginalized viewpoints and bringing neglected issues to the fore.

Michael Marchant is currently studying toward an M.Sc. Africa and International Development at the University of Edinburgh. While completing his first degree, Michael was the director of a community development project operating in high schools in several Cape Town townships.

Corporate Social Responsibility: Solution or Part of the Problem?

The term Corporate Social Responsibility (CSR) has gained new focus and remarkable prominence since the 1980s. What is noteworthy is that it has moved beyond local or national arenas and become the subject of global attention. In the context of developing countries, it has become part of broader debates on development and poverty reduction, particularly in relation to the absence of governance in many areas. The issue has been particularly contested when it comes to the behaviour of oil and gas extracting multinational corporations. The Shell Petroleum Development Corporation (SPDC) and its operations in the Niger Delta have been at the centre of attention. The environmental degradation, continuing violence and continued poverty of communities in the Delta have been increasingly scrutinized in relation to SPDC’s activities in the area.

Despite a significant increase in the SPDC’s development projects in the region, scholars and civil society actors argue that very little tangible progress has been made (Frynas, 2005: 588). This paper seeks to examine what the primary obstacles are to the SPDC’s CSR efforts. After a brief look at the history of Shell in the Niger Delta, this think piece will present three key factors:

The complex nature of conflict and other social problems in the Delta is beyond the scope of CSR activities to address.

The SPDC’s organizational structure and culture has prevented the adoption of CSR activities that would best achieve developmental goals.

Despite progress since the adoption of CSR practices, the continued unwillingness of SPDC to acknowledge its role in the situation in the Delta undermines its commitment to CSR.

Shell in the Delta

The Niger Delta is a vast 70,000 km2 oil basin in the southern region of Nigeria and consists of nine administrative states. Shell, in a joint venture with the Nigerian National Petroleum Corporation (NNPC) has been extracting high quality crude oil there since 1958 (Boele et al, 2001: 75). Very early in the process, the impacts of SPDC’s oil extraction led to protests by local communities in the Delta. The primary complaints have been about destruction of the environment and the industries reliant on it, and that insufficient revenue from oil profits reaches communities themselves (Boele et al, 2001: 77). The most conspicuously hostile relationship developed between the SPDC and the Ogoni community, led by activist Ken Saro-Wiwa. These protests took on a global character when the Nigerian government executed Ken Saro-Wiwa and eight other men involved in leading protest by the Ogoni people against Shell’s operations.

It is against this backdrop of escalating and often violent domestic protest, increasing international criticism of Shell and the associated reputational risk, that the SPDC’s rapid adoption of CSR should be seen. In 1995 Shell stated; “we do not hold the solution to community demands for more amenities, more development, more employment and more control over oil revenues. That is primarily a government responsibility” (Boele et al, 2007: 76). However, their website now claims that Shell is a corporate citizen that “places great importance on making a difference in the environment in which people live and work, fostering and maintaining relationships with communities, taking care to be a good neighbour and contributing to sustainable development initiatives.”

Limitations to SPDC’s CSR in the Delta

In line with this rhetoric, the SPDC has implemented many CSR policies since the late 1990s, particularly focusing on ‘development’ projects in the region. Yet most scholars highlight the conspicuous failure of these projects. It has been consistently shown that communities in the Delta still have a highly negative view of Shell’s operations in terms of their environmental costs as well as the continued lack of employment and community development projects (Frynas: 2005). Violence within the Delta has only escalated in recent decades with attacks on oil infrastructure and industry personnel making the region essentially ungovernable. With many supporting the merits of CSR, it is important to seek an explanation for these observations. This think piece now presents three crucial factors that act as obstacles to the success of SPDC’s CSR projects.

The Context of the Niger Delta

One central problem with the faith in CSR is that specific histories and complex contexts are often overlooked. The intricate historical causes of the socioeconomic exclusion of Delta communities are a case in point. Watts (2004) points out that the Delta is characterized by remarkable ethno-linguistic diversity and that its communities were economically marginalized during British rule where indirect governance through a warrant chief system was implemented (Watts, 2004: 58). Since independence, the communities have complained that they remain marginalized by a federation that is dominated by the ethnic majorities of the Hausa, Igbo and Yoruba (Watts, 2004: 60). The entry of oil extraction into this conflict has added a new dynamic to the grievances of these communities. They have protested that oil revenues are not shared with local governments and thus that they continue to be excluded from economic gains, even when the oil is found in their communities (Boele et al, 2001: 77).

This history of exclusion has also interacted with many more recent developments outside of the oil industry. The significant vacuum in governance capacity cannot be understood without consideration of several decades of authoritarian rule, as well as structural adjustment programmes that increased youth unemployment and impoverishment. This has contributed to the rise of militant youth groups that align themselves with chiefs and engage in sabotage of oil company equipment (and violence with competing groups) in order to extract concessions and compensation from the oil companies for their communities (Watts, 2004: 64). The environmental destruction which has accompanied oil extraction, along with the relationship between Shell and the Nigerian government and the lack of revenue sharing, has led to these grievances being amplified and directed toward oil companies.

Thus, the conflict and violence is a result of long-term political and economic factors that have led to complicated inequalities and community grievances. It is not clear how CSR operations by the SPDC can have an impact on the development of the Niger Delta without addressing these more fundamental historical inequalities and political dynamics. For one, it is unclear how any corporation’s CSR policy could do this. Perhaps more importantly though, the very notion of CSR under discussion is premised on the idea that CSR policies can help in isolation from state involvement. This case seems to cast significant doubt onto that idea, as the core grievances that cause disorder in the Delta are based on the state’s behaviour, structure and performance.

SPDC’s Organizational Structure and Corporate Culture

Beyond the complexity of the Niger Delta and the extreme difficulties facing the SPDC in such an environment, one cannot overlook the obstacles within the corporation that limit the possibilities of successful CSR. SPDC projects are often organized and run by office managers, engineers and other professionals with very little (if any) experience in development work and little understanding of community concerns. In addition to this, the corporate culture within oil companies such as Shell is particularly focused around the technical skill of solving an identifiable problem that is usually quantifiable (Frynas, 2005: 592). This focus limits community involvement and ownership, leading to increased dissatisfaction with SPDC projects and a lack of sustainability. There is the additional concern of the persistence of the ‘business-case’ model within the SPDC’s approach to CSR. SPDC activities are often perceived as ‘buying support’ with short term ‘gifts’ (PR exercises) as opposed to being long-term projects (Frynas, 2005: 589).

The SPDC has attempted to address these issues by employing more social scientists and enlisting the support of NGOs to run projects. However, operations remain within a specific unit addressing CSR. This makes it clear that Shell has not adopted CSR into its core business practices and models, because CSR is seen as the task of a unit, rather than something that should be taken on board by all operations and departments of the business (Slack, 2012: 182). This has important repercussions for the way SPDC operates. For one, it means that senior managers and executives have very little responsibility for CSR projects. Secondly, these executives are not compensated based on performance in this area (Slack, 2012: 182). Because of this, incentives to do ‘good CSR’ and accountability for CSR projects are lacking in the corporate structure of the SPDC. This interacts with a corporate culture that does not take social and environmental costs into consideration when making business decisions (Frynas, 2005: 592).

Accepting Responsibility

As discussed, the violence, poverty and environmental destruction in the Niger Delta is a result of a complex history, in which Shell’s oil extraction itself has played a significant role. Extensive damage to small-scale fishing and farming which has destroyed livelihoods in the Delta is a result of the SPDC’s activities. Furthermore, the SPDC has certainly contributed to growing militarism in the region, not simply through generating societal grievances but also by directly supporting and paying community groups to militarize in the hope of protecting the company’s infrastructure (Asgill, 2012: 25). Despite this, the SPDC treats issues such as environmental destruction and poverty as some preexisting unfortunate situation that has no causal relationship with the company’s activities. This refusal to acknowledge responsibility plays a significant part in contributing to a deep (and historically informed) distrust of Shell in the Delta communities.

In addition to undermining trust, something seen as a valuable (if not crucial) tool in establishing meaningful CSR, this rejection of responsibility carries through to the rhetoric and practice of the SPDC. For example, Shell focuses on criminality and oil theft as the cause of environmental destruction (Shell: 2013). This is despite the fact that many people argue that oil companies are often aware and even complicit in these activities, and at the very least have contributed to the conditions in which criminality thrives (Asgill, 2012: 25). In addition to these concerns, it appears that the SPDC’s long-term effects on the Niger Delta (economically or socially) are never taken into account by their CSR activities. Rather, focus is placed on specific community initiatives that largely draw attention away from the macro-level dynamics at play (Frynas, 2005: 596). Thus it is clear that the SPDC’s refusal to acknowledge its role and responsibilities for the situation in the Niger Delta acts as a significant obstacle to its CSR policies.

Conclusion

The adoption of CSR was not simply a corporation-led movement. Rather, it was part of a shift in the thinking of development practitioners within a new world order where ‘rolling back’ incompetent states provided space for a far greater role for the private sector in all areas of life. Included in this thinking was the potential for self-regulated CSR by industries to contribute to development goals. This think piece has revealed some problems with this thinking. In this particular case, the complex nature of the challenges facing the Niger Delta means that many of the fundamental problems in the region (particularly conflict) cannot be addressed by Shell alone. Secondly, it is clear that the SPDC faces severe organizational constraints in designing and implementing successful CSR. However, there is a deeper and more fundamental issue: CSR goes together with an ideational shift that largely absolves multinational corporations in extractive industries from their contribution to the social, political and economic problems facing the countries and communities in question. The underlying logic of CSR is that the problems found within the communities exist independently of any of the company’s activities. Yet, by ignoring the structural causes of these issues and the role of the corporation therein, the CSR projects can have no more than a superficial impact at best, and may, in some cases, exacerbate the problems faced by local communities.

Michael Marchant is currently studying toward an M.Sc. Africa and International Development at the University of Edinburgh. Prior to this, he was awarded a Bachelor of Social Science (Honours) in Politics, Philosophy and Economics with distinction from the University of Cape Town (South Africa). There, he completed his honours dissertation comparing opposition parties in dominant party regimes. While completing his first degree, Michael was the director of a community development project operating in high schools in several Cape Town townships. This interest in development led him to pursue his degree at Edinburgh. His current research interests include the relationship between multi-national corporations in extractive industries and Africa’s development, as well as the impact of secrecy jurisdictions and vulture funds on Africa’s poorest countries, which is the topic of his Master’s dissertation.

This article reflects the views of the author(s) and does not necessarily represent those of the United Nations Research Institute for Social Development.